How is MRR calculated?

Contracted recurring revenue normalised to a monthly value at a point in time. Annual contracts are divided by twelve; multi-year contracts are divided by their term in months, not counted in full.

What is MRR movement?

The bridge from one period's MRR to the next: starting MRR, plus new, plus expansion, less contraction, less churn, equals ending MRR. The components are far more informative than the headline.

Should one-off fees be included in MRR?

No. Implementation, training and other non-recurring charges are not recurring, and including them makes the metric a revenue report with a misleading name.

What is the difference between MRR and ARR?

Only the period of normalisation. Businesses with monthly billing tend to use MRR; those with annual contracts use ARR. Reporting both from different sources is a common cause of reconciliation failures.

Monthly Recurring Revenue (MRR)

The normalised monthly value of recurring subscription revenue. The same quantity as ARR at a finer resolution, and the base for movement analysis.

The calculation

Contracted recurring revenue normalised to a month at a point in time. A £12,000 annual contract contributes £1,000 of MRR, not £12,000, and a three-year contract contributes its monthly value rather than its total.

The movement bridge

The headline number is much less useful than its decomposition, and any MRR report that omits the bridge is hiding where the change came from.

MRR movement components

Component	Definition	What a change signals
New	MRR from customers acquired	Acquisition motion
Expansion	Increases from existing customers	Value realisation and expansion motion
Contraction	Decreases from customers who stayed	Value or pricing pressure
Churn	MRR from customers who left	Retention
Reactivation	Returning former customers	Win-back, if you run one

Source: Standard decomposition

Why the bridge is the point

Flat MRR is consistent with a healthy business in steady state and with one where heavy churn is being covered by heavy acquisition. The headline cannot distinguish them; the bridge does immediately.

Computing it defensibly

Normalise every contract to a monthly value, regardless of billing frequency. Billing timing must not affect the metric.
Exclude non-recurring charges entirely, and report them separately if they matter.
Build the bridge every period and check it reconciles. If starting plus movements does not equal ending, the components are drawn from different sources.
Classify downgrades as contraction, not churn. Conflating them makes it impossible to tell shrinking from leaving.

Where it misleads

Usage-based revenue annualised or monthlyised turns a snapshot into a forecast and imports volatility.
Contracts in a notice period count fully until they end, so MRR can look stable while known losses are pending.
It carries no margin information, so two businesses with equal MRR and different cost of service are not comparable.

RELATED TERMS

Annual Recurring Revenue (ARR)

The annualised value of recurring subscription revenue at a point in time. A run rate, not a measure of revenue earned during a period.

Expansion Revenue

Additional recurring revenue from existing customers: more seats, higher tiers, additional products or increased usage.

Contraction MRR

Recurring revenue lost from customers who stayed but reduced spend — fewer seats, a lower tier, a renegotiated rate.

Churn

Customers or revenue lost over a period. The leak determining whether acquisition compounds or merely replaces.

COMMON QUESTIONS

How is MRR calculated?: Contracted recurring revenue normalised to a monthly value at a point in time. Annual contracts are divided by twelve; multi-year contracts are divided by their term in months, not counted in full.
What is MRR movement?: The bridge from one period's MRR to the next: starting MRR, plus new, plus expansion, less contraction, less churn, equals ending MRR. The components are far more informative than the headline.
Should one-off fees be included in MRR?: No. Implementation, training and other non-recurring charges are not recurring, and including them makes the metric a revenue report with a misleading name.
What is the difference between MRR and ARR?: Only the period of normalisation. Businesses with monthly billing tend to use MRR; those with annual contracts use ARR. Reporting both from different sources is a common cause of reconciliation failures.